A few weeks back, a millionaire from Australia’s version of financial “advice” suddenly appeared on our news feeds. The message:
Somehow this headline exploded across the interwebs, as cranky finance writers complained about how millennials are destroying the housing market, and created a whole new meme featuring the innocent face of avocado toast in the process.
Yet again, another great American tradition is crushed by this lazy, selfish generation, we’re told. And what else have we supposedly killed? Sex, dinner dates, running, and even college football, apparently.
Clearly, we’ve all been doing life wrong. If we want to live the American dream, we should stoically forego that $19 avo toasty goodness, and wa-la! A house, picket fence, and 1950s-style passive-aggressive Joan Cleaver look-a-like will magically appear.
But is any of this actually true or just green, gooey clickbait? And since this came directly from the anointed lips of a millionnaire, we should certainly all sit up and listen, right?
Actually, that would be a big fat nope. But don’t just take my word for it, here are five reasons you should politely ignore preachy millionaires:
#1 – Millionaire status ain’t what it used to be.
Look, let’s get real. Being a millionaire isn’t what it used to be. I know, I know. It sounds like a lot of money, but humans are terrible at overestimating potential short-term returns and underestimating the power of steady compounding interest over very long periods. In fact, I know people that have never made more than an average middle class salary that became millionaires over time. All it took was consistent saving and a disciplined investment strategy — compounding interest does all the rest of the work for you.
To prove my point, if you just saved as little as $200/month in the stock market over four decades, you’d have well over a million dollars (assuming average historical stock market returns)
So, I’m not sure how just being a millionaire qualifies someone to give advice. But let’s keep going…
#2 – No amount of pinching your toast pennies is getting you a house.
Tim Gurner, our millionaire unsolicited advice-giver, is quoted as elaborating on his statement as follows:
When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each.
Ok, ok, maybe he has a point. $19 for any kind of toast does sound a little exotic. So then, let’s math this puppy up: let’s say Tim is referring to one order of $19 toast and four $4 coffees per week. That’s $1,820/year in avo-latte splurging, or $9,100 over a five-year period.
Now while nine grand is a lot of money, you’re still a very long way from down payment on most houses in the market. Since the median sales price of a new home in the U.S. is now over $300,000, it would take over 30 years to save enough to make the traditional 20% down payment.
#3 – Renting is fine. There’s nothing financially “magical” about owning a home.
Owning a home used to be symbol of the American dream — a sign that you’d “made it.” After the recession, however, it’s just a symbol of what it really, truly, is — a big, expensive, illiquid “investment.” And like any investment, houses can go down in value, as we all saw too clearly in the crash.
On top of all that, housing typically is a mediocre investment at that, since historically the housing market has lagged the stock market by a significant margin.
It’s also something that may tie you down unnecessarily. I’ve already talked before about how it can make smart financial sense to rent instead of buy, but I’m not the only one who thinks that. Here’s a list of self-made millennial millionaires that agree:
- FIREcracker of millennial-revolution.com
- JD Livingston of themoneyhabit.org
- Brandon aka the “Mad Fientist” at madfientist.com
- Ramit Sethi of Iwillteachyoutoberich.com
#4 – What is with the media’s obsession with cost cutting?
It seems like three out of four articles I see today talk about how to cut your way to wealth. Experts drone on constantly about the “latte effect,” skipping European vacations, and similar cost-cutting measures. But my experience has been quite the opposite. For every ten self-made millionaires I’ve worked with, probably at least eight have an income that’s solidly upper middle class or higher. In fact, most of them easily make six figures or more.
That’s not to say that there aren’t exceptions to the rule, of course, but one path is certainly easier than the other.
A far better way is to focus on the things that really move the needle, like maximizing your income at work, starting a business, finding ways to save in taxes, and learning how to invest. Of course, expenses do have to be kept down to reasonable level, but for most people focusing on cutting expenses alone is a hard road that ends in frustration and eventually giving up.
#5 – Avocado toast is freaking awesome.
Ok, ok, let’s be honest. While all the reasons above are all well and good, the best reason to not give up on avocado toast is … we just don’t freaking want to! It’s too dang tasty for that.
So, go get some guilt-free Avo-Toasty goodness
So, there you have it — five reasons you can ignore your elders and enjoy some guilt-free avocado toast. But if you’re still afraid of ending up in the poorhouse, why not have your toast and save money too? Thanks to my friend Hillary of the amazing cooking blog 918Plate.com, here are three amazing avocado toast recipes (with pictures below) to make your hipster heart melt with happiness. Bon appetit!